Hilton Garden Inn, Gateway Hospitality Group pay $4M settlement after withholding tips from servers
Hilton Garden Inn and the hotel's management company must pay $4 million in lost wages and penalties to their servers after the hotel chain charged a "service fee" that was never paid to its wait staff.
Hilton Garden Inn settled the class action lawsuit after it was discovered that Hilton hotels in Missoula, Billings, Bozeman and Kalispell were keeping the service fee.
About 550 people will receive compensation from the lawsuit, with checks for lost wages ranging from $7 to $86,000, depending on how many events the employees worked for Hilton without getting tips.
Ten former employees of Hilton were named in the lawsuit, including Paula Everist from Billings. The Billings Hilton Garden Inn began contracting with the Gateway Hospitality group in 2008. Everist worked for the Billings Hilton Garden Inn from 2011 to 2015. During that time, she was paid an hourly wage, but no tips were ever distributed to her.
According to the suit, Hilton used to run its own catering and banquet services. At that time, a service fee of 15 percent to 18 percent was added to the bill and turned over to servers and other non-management staff involved in preparing the food, serving it and performing other services at catered events.
When Hilton contracted Gateway Hospitality Group to manage the hotel, including the catering of events, the service charge increased to 18 percent to 20 percent of the bill, but the tip money was not distributed to the staff, according to the suit.
The four hotels are owned by multiple holding companies. Missoula and Kalispell are owned by one group and the Bozeman and Billings hotels are owned by another. All four used the Gateway Hospitality Group to manage day-to-day operations for the hotels.
A contract from a 2014 Bozeman event states the service charge would be "fully distributed to servers, and where applicable, bussers and/or bartenders assigned to the event."
Don Cape Jr. is the managing partner of the Hilton Garden Inns in Bozeman and Billings. The two properties are owned by different organizations but have nearly identical boards of directors, and Cape is the managing partner for both.
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Cape on Tuesday told the Billings Gazette that the withholding of tips was "a mistake they corrected" as soon as it was brought to the boards' attention.
The group was notified of the problem in 2014, Cape said, and "owned the mistake as soon as we became aware of it."
However, a wrongful termination lawsuit filed by a Bozeman manager stated management was aware of the problem much earlier. Laurie Zabawa sued the company and the Bozeman Hilton Garden Inn in 2014 after she said management pressured her to quit her job after she complained her servers were no longer receiving tips.
After litigation began against the company, the four Montana Hilton hotels split a $1.9 million payment to compensate the employees for the time they worked without tips, Cape said. The hotels also calculated interest for lost wages.
The lawsuit settlement yielded an additional $2 million payment split between Gateway Hospitality Group and the insurance company for both Hilton Garden Inn and the hospitality group.
The two payments together amounted to a settlement of a little over $4 million. The payment includes the amount of lost wages and a penalty payment for establishing the practice of withholding tips.
Montana employment law states that service charges, if imposed by a business engaged in the food, beverage or lodging industry, belong to the employee.
The attorneys who represented the employees received 25 percent of the total settlement.